The Baltimore-based company made $46.4 million in the quarter that ended March 31, compared with $41.6 million in the corresponding period a year earlier.

Profit per share rose 8.3 percent to 65 cents in the quarter, compared with 60 cents a year earlier. The results, which included the acquisitions of two community banks last year, met Wall Street's estimates, according to Zacks Investment Research, which surveyed 12 analysts.

FOR THE RECORD - A photo in the Business section yesterday was misidentified as Edward J. Kelly III, Mercantile Bankshares Corp. president and chief executive. He is pictured above. The Sun regrets the error.

"I think the quarter went well," said Edward J. Kelly III, Mercantile's president and chief executive, who has been on the job since March 1. "There were several highlights ... loan growth was actually very strong."

Kelly, a former investment banker at J. P. Morgan Chase & Co. and head of its Global Financial Institutions group, was handpicked by H. Furlong Baldwin, who ran Mercantile for 25 years and announced in February that he was stepping aside. Baldwin is chairman of the company's board of directors.

Mercantile's profit was generated by strong growth in its net interest income, or profit mainly from loans, which rose 8.6 percent to $105 million, compared with $96.6 million a year earlier. Loans jumped 15 percent to $6.8 billion in the quarter, up from $5.9 billion a year earlier.

Mercantile's profit also was bolstered by solid increases in noninterest income, which includes income from trust operations, service charges on deposits, investment securities gains and mortgage banking fees.

Noninterest income rose 13.6 percent to $33.7 million, up from $29.7 million a year earlier.

Revenue from its trust division rose 1.4 percent in the quarter to $17.1 million and suffered from a declining stock market. Revenue from service charges on deposit accounts rose 11.5 percent to $6.4 million, and revenue from mortgage banking fees more than doubled to $1.6 million. Mercantile also took $1.5 million in gains from the sale of securities.

"It was generally a pretty good quarter," said Gary Townsend, senior analyst at Friedman, Billings, Ramsey Inc., an institutional brokerage in Arlington, Va. "They always have good quarters, no surprises. I like that kind of institution."

Mercantile's shares closed at $38.76 yesterday, up 54 cents.

The company continued to beat profitability benchmarks impressively. It matched the quarter a year ago with a 2.11 percent return on average assets. In other words, Mercantile made $2.11 for every $100 in assets, beating the industry average of about $1.16.

Mercantile's deposits were up 14.5 percent in the quarter to nearly $7 billion, and assets rose 13.0 percent to $9.1 billion.

The company, however, said that its net interest margin declined to 5.09 percent from 5.22 percent a year earlier.

The net interest margin shows how much a bank makes on loans and investments after interest payments to depositors and creditors.

Mercantile's margin has tightened because the Federal Reserve Board has been cutting interest rates. This means the interest rates Mercantile charges borrowers who have variable rate loans also are falling.

"Falling rate environments are, frankly, not as good for us a rising rate environment," Kelly said. "Based on where we are today I still feel good about the year."